| The Information is hosting an event on the impact of AI on the IPO market in San Francisco on November 14th, with speakers from NYSE, Citi and J.P. Morgan. How is the IPO market shaping up for tech and what will AI's impact be? More details & request an invite here. Greetings! Danger, danger! That's the message Wall Street sent Meta Platforms tonight, as investors sold off shares in the company in the wake of its predictably healthy third-quarter earnings result. They perhaps weren't thrilled that Meta plans to lift capital expenditures significantly again next year, on top of a projected increase this year of as much as 43%. Meta's habit of spending tens of billions on unproven new technologies has been a periodic irritant for investors, most recently in 2022 when the spotlight was on Reality Labs spending. But the big concern that year was that Meta's revenue fell for a couple of quarters, not the investment plan. Nowadays, investors seem to have made peace with CEO Mark Zuckerberg's lavish investment spending—as long as the company delivers strong revenue and earnings growth, which it has done. But the near-term prospects for continued strong profit growth now seems to be in doubt: Meta also intimated tonight that what it called "significant acceleration" in expenses related to its "expanded infrastructure"—jargon for all those servers it needs to run its artificial intelligence models—would dampen its profits next year. In after-hours trading, Meta stock was down 3%. Zuckerberg explained his decision to ramp up capex spending even further by telling analysts that "new AI advances" offered "a lot of new opportunities" to "accelerate our core business" and deliver a "strong" return on investment over the next few years. That's fine, but when it comes to promises about the return on investment from AI spending, investors are understandably skeptical. The value of Microsoft's and Alphabet's stock, both of which are also making massive AI investments, has drifted down in recent months. And both those companies, unlike Meta, have cloud businesses that should benefit from AI investments. Whether those businesses will benefit enough to justify the investments is, however, the trillion-dollar question. It was a question underlined by Microsoft's September-quarter numbers tonight, which showed growth in its Azure cloud unit slowing slightly from the previous quarter—and projected to slow again in the December quarter. Microsoft executives went out of their way to reassure analysts the slowdown had nothing to do with weakening customer demand and—particularly in the December quarter—was more about the company's ability to bring new AI capacity on line as fast as it had hoped. Azure growth should speed up in the March and June quarters, Chief Financial Officer Amy Hood said. Microsoft stock was trading down about 3% in after-hours trading, even though the company's revenue growth was slightly stronger than analysts had expected. When it comes to AI, investors are fretful. Software firms selling to businesses are not having a lot of fun nowadays. On Wednesday, we got news that two such firms—Dropbox and Miro—were laying off about a fifth of their staff, both citing a need to streamline their structures. The Information scooped the layoff news about Miro, which makes online whiteboarding tools that help employees collaborate on projects remotely. Miro was one of a group of software firms whose businesses soared during the pandemic when remote work became all the rage. Since then customers have gotten pickier about the software they buy as they look to cut costs. Dropbox also has been hurt by businesses cutting back the number of Dropbox licenses they pay for as they look to save money. The number of paying users has barely budged—it was 18.22 million at June 30 compared with 18.12 million six months earlier. And as CEO Drew Houston told staff today, the company is still seeing "softening demand and macro headwinds in our core business." • Zhang Yiming, the founder of TikTok's parent ByteDance, is China's richest person, worth $49.3 billion, according to an annual ranking of the country's wealthiest individuals. • The European Commission is set to launch a formal investigation into Temu, Bloomberg reported Wednesday. The EU on Oct. 11 requested that Temu share information on how it addresses and prevents the sale of counterfeit, unsafe or illegal products on its site, and Temu's responses did not sufficiently address the commission's concerns, the report said. • Cryptocurrency exchange Coinbase reported its fourth straight quarterly profit and announced a stock buyback of up to $1 billion, showing the company is delivering on its promise of steadier profits even during crypto market swings. • Shares of Reddit rose 42% to $116 a share on Wednesday, as investors applauded the social media firm's strong third-quarter earnings report. Reddit shares have now risen 241% since its IPO in March. More than 100,000 readers rely on The Information's Creator Economy newsletter for coverage of the creator startups making waves, big tech companies' social media playbooks, and scoops on the sector's biggest hires. Start receiving the free newsletter here. | 
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